Deduction of service tax from life insurance agents commission

hello sir
i am a insurance agent of sbilife and every month company is deducting 12.66 % as service tax from my commission. and also deducting 10% TDS. So i want to know is it legal to deduct service tax from agents?
Because other companies like LIC, Oriental insurance are not deducting any service tax from their agents commission.

Asked 12 months ago in Service Tax from Dibrugarh, Assam

Dear Sir,
From 1st October,2014 Service tax is applicable on insurance company and whereby insurance company need to pay service tax on commission paid to agent. Certain company do not bear the Service Tax value and deduct the said amount from agent commission itself. it is not the purpose of levy of service tax but company follow the said system and which is legal treatment so there can not be any questions on it. However the deduction you can certainly negotiate with your company and try to reduce the liability by compelling them to pay service tax on it. As company always get credit of such tax paid and they have double benefit on it.

As per my view life insurance agents are not liable to service tax unless they are working as franchisee basis and raising a bill on the insurance company.
The agents are paid commission on the basis of premium received under the
policies procured by them. Many times, the agents are also provided
incentive in the form of bonus or any other form to encourage them to
achieve certain targets of procuring policies. The amount which can be
directly linked to the quantum of premium generated under the policy
procured through the agents can be considered commission or fee received
by the agents. Any other sum which has no relation to the quantum of
premium received under the policy generated by the agents cannot be
included in the value of taxable service.

Thank you sir. kindly inform me How I can approach sbilife and stop the deduction of the service tax from my commission. Which reference or Section/Act of IRDA I will provide them?

Asked 12 months ago

DEAR SIR,
IRDA has not role to play into it as it is the question of tax liability and rate of commission offered by the insurance company. So you can only take relevant provision of service tax and try to negotiate with insurance company.
Mind the fact that they are not doing anything illegal. They are just transferring their liability to you and hence on legal front you will not able to make any influence or argument.

Service tax can be recovered from the service providers, if service tax is applicable, just like TDS, under what is called " Reverse charge mechanism". In the case of insurance agents, it has become mandatory on the part of the service receiver like the Insurance Company to deduct 100% of service tax payable by the service provider and remit it to the Government.
As you mentioned that other companies like LIC, Oriental Insurance are not deducting any service tax from their agents, you may take up with your company SBI Life and request them not to deduct Service tax, as you may not be covered under service tax ambit, as the amount you may receive is less than Rs. 10 L.

Dear Sir,
As per the details provided by you, the insurance company cannot deduct Service Tax from the amount of comission payable to you. It may so happen that they might be deducting some other charges from your comission.

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